Foreign Investment and Economic Growth in Thailand - Granger Causality Test -

Abstract

This paper aims to study whether foreign investment causes economic growth or whether it is a consequence of increased economy in Thailand. According to the Bank of Thailand data, this study investigates only net foreign direct investment and net foreign portfolio investment by other sectors which comprise of other financial corporations and nonfinancial corporations, households, and non-profit institution serving households which cover the highest ratio of total foreign investment in Thailand as percentage of GDP. The rate of change of GDP from the Office of the National Economic and Social Development Council (NESDC) represents economic growth (GDPG). Unit Root test and Granger causality technique have been used to analyze the quarterly time series data during the period of 2009Q4 and 2018Q3. The result of Granger causality test suggest that there is no causality relationship between net foreign direct investment and net foreign portfolio investment by other sectors and economic growth in Thailand and vice versa.